So the budget speech took place and it was a hit. Do you remember when we started talking about this here? We figured the biggest things to happen would be new taxes, higher taxes, higher food bills, a lower interest rate, and static (if not worse) unemployment numbers. And then the speech happened, and among other things, our government made a surprising announcement. It seems that instead of taxing South African taxpayers even more, they have decided to reduce public sector wage bills in order to reduce the budget deficit. As a result, public wage bills will be cut by just over R160 billion over the next 3 years. They also pledged to reduce their unnecessary expenses such as cell phone use and travel arrangements.
Which is always nice to hear… But what does that mean for you and you and you and the other guy behind you?
We’ve broken down what we think will impact most, if not all, South Africans.
Starting with… Personal Income Tax
Increases above inflation have been announced for income tax brackets and tax refunds, which sounds great if you’re interested in economics. For those who aren’t reading the Financial Times with their morning cup of coffee, this means individuals pay less income tax. As an example (and so that we can all enjoy this announcement a little more) this means that if you make say R22,000 a month you could save around R1,500 in taxes a year.
Add in our decreasing car insurance premiums or multi-car discount (or both) and you’re on your way to some big savings by the end of the year!
Now let’s talk about investments
It has also been announced that the annual contribution limit for ‘tax-free savings accounts’ will be increased to R36,000. This is an increase of R3,000 over 2019 and means you can put away more of your hard-earned casheroo sooner and benefit from compound interest. The lifetime contribution limit remains at R500,000.
If you’re wondering what “compound” means, we have a nifty explanation of how compound saving works when you buy our auto insurance (the 1 with monthly decreasing premiums) that should help you out.
The deal with transfer duties
Are you considering selling your property? You have good news because the threshold for paying transfer taxes when selling real estate has been raised. Even better, properties priced under R1 million (was R900,000) are now exempt from transfer fees!
To help you sell your home faster, here are some incredibly helpful tips.
Are there people on the losing side?
Unfortunately, there are some people who will definitely feel a bit unloved this year and that includes motorists and those who consume alcohol and smoke cigarettes. We can tell you that you pay R2.89 per bottle of spirits, 14 cents more for a standard bottle of wine and 8 cents more for a can of beer. Also, smokers can look forward to paying 74 cents a pack of cigarettes, with plans in the works to tax e-cigarettes in 2021.
Let’s talk to the motorists now, because that’s a lot of us, right? Yes. The first sting is the increased fuel delivery. The fuel levy has been gradually increased in recent years and according to the AA “any such increase this year will be more than damaging, it could be catastrophic”.
So that puts pressure on the budgets of many South Africans. And then there are also possible increases in VAT, which could also make driving more expensive. Reportedly VAT will increase by a further 1% which brings us to 16% and could have a negative impact on fuel prices in South Africa. Because of this, it’s important for all of us to review our budgets, reconsider how much we’re spending on items impacted by these increases, and make a few adjustments to save.
And what better place to save as a driver than on car insurance?
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